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Many Canadians looking south to buy get-away-from-it-all property

Published: Thursday, August 14, 2008 | 11:56 AM ET
Canadian Press: Eric Shackleton, THE CANADIAN PRESS

TORONTO -For Canadians looking to buy a get-away-from-it-all piece of paradise down south, this is probably one of the best times to take the plunge with the Canadian dollar strong and U.S. property values tumbling, say real estate experts.
And some baby boomers who are retired or about to retire are doing so even though they are concerned they might buy on the high side only to see the value of their investment sink if the U.S. economy falls into a deep recession, the experts say.

Figures from the U.S. National Association of Realtors indicate that 11 per cent of all foreign buyers of homes in the United States last year were Canadian.
In Florida, the U.S. state with the highest foreign ownership, Canadians made up nine per cent of buyers in 2007, up from 7.1 per cent in 2005.
Connie Allen, owner of Alternative Realty Corp. in Burlington, Ont., characterizes the Canadian interest in U.S. properties as "anecdotally a lot of interest is being expressed and there are some who are buying."
"Very much, though, more inquiries than sales," said Allen, whose company specializes in properties in the sunshine state. Tannis Dawson, a senior tax and financial expert in Winnipeg with Investors Group, (TSX:ING) Canada's largest mutual fund company, said "one of the big things that's sending them (south) is our currency."

The loonie "has been on par or nearly on par with the U.S. dollar for some time now and that has many thinking that it has leveled off and probably isn't going any higher," she said.

 As a result, for those who can afford to pay cash for a house, they are "in a good position because they know what their currency is going to be and their exchange rates," said Dawson.

Many Canadians also have concluded that "there's a limit to our second home real estate market," said Dawson.
Properties in many resort areas such as Muskoka in Ontario, Canmore, Alta., and the mountains near Gatineau, Que., have shot up in value over the last two years.
It is more expensive to try to buy in Canada than in the U.S. when looking for the same square footage, she says.

For example, says Dawson, a property in Canmore cost about $400,000 a couple of years ago. Now it is $600,000.
In the U.S. by comparison, she says, in 2002 a house cost about US$325,000 or about C$519,000. In 2008, a US$325,000 home now goes for about C$325,500.
Allen says "what we're finding is that the people we're getting inquiries from and who appear to be buying are baby boomers that have retired or are about to retire."

Last winter, "there was definitely an increase in the number of Canadians buying property in Florida," says Allen.
However, so far this year, she says, the market has softened a bit.
Some, she says, are hesitating about buying a property because of concern over the the U.S. economy, whether it is going to continue to slow down, with housing prices falling even lower.
"They say, Oh boy, we can finally buy our property after renting all these years. Then they say well what is happening with the economy. Is it going to go lower, are we going to buy and then lose money."
This is especially true with buyers who see the property as mainly an investment rather than just a holiday sort of place, says Allen.
Dawson has some tips for people wishing to buy a property in the United States.
"It is best to have the funds to pay for a U.S. property up front especially when the currencies are at or near par" so as to take advantage of the strong Canadian dollar, she says.

If people have enough equity on their house in Canada, "they can take out a mortgage on that ... or do a line of credit or some personal debt," she says.
She also suggests buying a property in U.S. dollars at the start. Over the last 30 years or so, the Canadian currency has been more likely to fall rather than rise in value against the American dollar.
"If you take the U.S. way, you're probably not going to be really bad off when it comes to currency fluctuations."

About 53 per cent of Canadian buyers take out mortgages and 47 per cent pay cash, according to figures compiled by Investors Group.
Dawson says it is more expensive to get a U.S. mortgage. "In the U.S., if you're a non-resident they require you to put down 30 to 40 per cent of the property value.
"Plus you need six months worth of reserve. You have to put six months of your mortgage payments, insurance payments and your property taxes in an escrow account ... looked after by an escrow agent," she says.
If you take out a U.S. mortgage, for most U.S. banks it is necessary to find a prospective property first, then go and arrange a mortgage, says Dawson.
If you take out a Canadian mortgage on a U.S. property, you can go to the bank first and see how much you can raise, and then go shopping in the U.S. As well, you don't have to put down as much.
Allen says most Canadians who buy property in Florida, do so for the long term. "They're not looking to come down to Florida and flip a property."
"In a lot of cases, their children will be of age, and they will want to use it."

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